Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
All data is for the week ended March 20, 2020.
The U.S. stock market fell dramatically, and investors are now expecting a global recession (two consecutive quarters of a declining economy) with the S&P 500 having fallen into bear market territory as a result of the COVID-19 virus. While the current number of confirmed cases is growing, markets will be looking for stability in the number of new cases as a guidepost that recent actions being taken are having the intended effect.
For the week, the S&P 500 dropped 14.95% as the Russell 2000 fell another 16.14% and the NASDAQ lost 12.62%. Overseas the international developed markets (MSCI EAFE) declined 5.76% while emerging markets (MSCI EM) fell 9.79%. All sectors experienced drops with the energy sector down another 19.6% as it continues to suffer from the price war between Saudi Arabia and Russia. (1)
The Fed had announced a plan to buy at least $500 billion of U.S. Treasuries and at least $200 billion of agency mortgage-backed securities effort to ensure financial markets are stable, functional and credit is flowing. In recent days it has sped up the pace of these purchases, and today committed to unlimited purchases of U.S. Treasuries and agency mortgage-backed securities and to set up additional lending tools to support struggling companies and financial markets.
Further, the Fed revived a program from the 2008 economic crisis which allows them to buy securities backed by student, car and credit-card loans, as well as loans to businesses through the Small Business Administration. They also announced plans to shore up the values of municipal debt and short-term loans (2) Recall that last Sunday the Federal Reserve lowered its benchmark fed funds rate by 100 basis points to a range of zero-0.25%, the second Fed cut to interest rates in two weeks and the first time the rate has been this low since 2008. On Friday, the 10-year U.S. Treasury note closed with a 0.92% interest rate, down 2 basis points for the week. (1)
Oil prices jumped on Thursday following the president’s announcement that the U.S. will intervene in the price war between Saudi Arabia and Russia. However, prices were down for the week by 28.7%, closing at $22.63 per barrel. (3)
Gold (GLDM), a holding in our Endowment Series and Precious Metals strategies, fell 2.2% last week as individuals continued to use this precious metal as currency to cover losses in their margin accounts. (4)
The first real bad U.S. economic data from the coronavirus outbreak was released on Thursday, as initial jobless claims surged 70,000 to 281,000, the highest level in 2.5 years and well ahead of economists’ consensus expectations for 220,000. It was one of the largest one-week increases ever and reached the highest level since September 2017. (5)
Proprietary portfolio happenings:
Teledoc (TDOC), a G33 holding, rose 10% last week as the U.S. Coronavirus Task Force said it plans to significantly expand the availability of telehealth services for Medicare beneficiaries.6
Did You Know? Star Trek’s James Doohan was a D-Day hero. At the invasion of Normandy, he killed two snipers and successfully led his men through a minefield. He was also shot four times in the leg, once in the finger, and once in the chest – but a cigarette case his brother gave him was in his front pocket, and it saved his life.
Sources: (1) JP Morgan Weekly Market Recap 3-23-20, (2) Financial Times 3-23-20, (3) Oilprice.com, (4) Yahoo Finance, (5) US Department of Labor 3-19-20, (6) US Center for Medicare & Medicaid Services 3-17-20